phpBB BBCode incorporates a tag for including images in your posts. Two very important things to remember when using this tag are: many users do not appreciate lots of images being shown in posts and second, the image you display must already be available on the Internet (it cannot exist only on your computer, for example, unless you run a webserver!). There is currently no way of storing images locally with phpBB (all these issues are expected to be addressed in the next release of phpBB). To display an image, you must surround the URL pointing to the image with tags.
We added a script at holics that resizes the image, to make the page display properly, even when the uploaded photo is too large. I could probably forward it to you if you wanted?